Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.
Display:
Dynamical equations... that's why you are forced into econometrics...there is no framework for a classical dynamical system modeling approach...where behaviors are terms in the equation. Game theory can give you some insight in some asset-based flows and some oligopolistic markets...not much more.

I know, it  is sounds like psychohistory because that's what it is...then , your hypothesis can be perfectly tested: which terms reproduce the observed data?

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Mon Jun 20th, 2011 at 04:38:28 AM EST
[ Parent ]
Dynamical equation approaches are likely doomed as closed theories because one way of thinking about the effects of economic innovation is to imagine it as changing the dimensionality of the dynamical system.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon Jun 20th, 2011 at 04:41:23 AM EST
[ Parent ]
Yes.. that is still the main problem...New markets. It seems long-term is not achievable.. short-term predictions could be in principle done. I think they could explain a lot about short-term poicy.. I mean, Greece, the FED, the ECB, the euros, the finantial shock.. you do not need a model with new markets changing the dimensionality.

and if the new markets do not represent a large chunk.. you may have proper medium-term approaches.

A pleasure

I therefore claim to show, not how men think in myths, but how myths operate in men's minds without their being aware of the fact. Levi-Strauss, Claude

by kcurie on Mon Jun 20th, 2011 at 04:52:07 AM EST
[ Parent ]
I contend that a [the?] major factor in the business cycle is the emergence of a new market.

Drawing a physical parallel, my model of the business cycle would be a bifurcation of an infinite-dymensional dynamical system on the period-doubling cascade. Imagine a fluid in a situation describable by a finite number of proper modes and thus a finite-dimensional dynamical system approximation. Other modes are all stable (i.e., a small deviation tends to dissipate). At some points as you increase the throughput (Reynolds number) one of the stable modes becomes marginal, then unstable. Then any noise will be amplified exponentially in the direction of this new unstable mode. But of course the right thing to do there is to consider the dynamical system of one dimension higher, where the growth of the mode is not exponential. It ia approximately exponential initially but then it saturates. Logistic growth might be a better approximation. So you have a transition from an attractor in N dimensions to one in N+1 dimensions that's a business cycle.

So the scale of one business cycle must be the medium-term timescale you talk about.

Economics is politics by other means

by Migeru (migeru at eurotrib dot com) on Mon Jun 20th, 2011 at 05:02:51 AM EST
[ Parent ]
So, in other words, complex mathematics are a key to good economics.
by Upstate NY on Mon Jun 20th, 2011 at 09:22:03 AM EST
[ Parent ]
Economics is harder than ecology which is harder than statistical physics which is harder than mechanics which is harder than geometry.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon Jun 20th, 2011 at 09:29:52 AM EST
[ Parent ]
Is Economics harder than Physics, or is it at the Galileo stage of its development, where  all the accepted scientists are in the possession of the Pope?

Any idiot can face a crisis - it's day to day living that wears you out.
by ceebs (ceebs (at) eurotrib (dot) com) on Mon Jun 20th, 2011 at 09:39:19 AM EST
[ Parent ]
The two are not mutually exclusive.

The harder a discipline is to study, the later should you expect it to mature as a field of science. If for no other reason then because getting good data is going to be a lot more expensive. One dude and his manservant could get quite good data on planetary motion even before the telescope. One dude and his manservant haven't a snowflake's chance in a blast furnace of getting good macroeconomic data unless they live in a modern industrial society that can afford to spend up to a percent of its GDP on data collection alone (and has the technology to automate much of it, and the institutions needed to standardise and enforce reporting requirements).

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jun 20th, 2011 at 09:55:58 AM EST
[ Parent ]
I am reminded of Dune where the Fremen had an understanding of the planets ecology that included Fremen as a large foraging animal. Fortunately that would be a stabilizing feed-back loop as it would reinforce the cultural norms of a large foraging animal.

In economics on the other hand, if you assume that humans are homo economicus, you then must assume that a fair number will read and act upon the theories in order to gain most for themselves. A de-stabilizing feedback loop as acting to take advantage of the system described in general includes acting differently then the system prescribes.

Then again, most of us are not sociopathic homo economicus at all. So there is that problem too.

Sweden's finest (and perhaps only) collaborative, leftist e-newspaper Synapze.se

by A swedish kind of death on Mon Jun 20th, 2011 at 02:43:44 PM EST
[ Parent ]
I am reminded of Dune where the Fremen had an understanding of the planets ecology that included Fremen as a large foraging animal. Fortunately that would be a stabilizing feed-back loop as it would reinforce the cultural norms of a large foraging animal.

At one point, Herbert has the planetologist who "goes native" claim that: "The highest function of ecology is understanding consequences."

Oh, and the name of that planetologist? Pardot Kynes. There are many good things that can be said about Herbert's alliterations. "Subtle," however, is not one of them.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jun 20th, 2011 at 03:20:16 PM EST
[ Parent ]
No.

Not misspecifying your models is key to good economics. There is nothing particularly enlightening about complex mathematics in and of itself.

The fact that not misspecifying your models requires complex mathematics is an unfortunate reality. The world would be much easier to understand if it didn't. But the reality is what it is - it doesn't get any worse by owning up to it.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Mon Jun 20th, 2011 at 09:36:33 AM EST
[ Parent ]
Also note, the change of dimensionality is a problem that would also plague ecology and sociology. These are evolving systems that can generate their own new entities endogenously though processes not described at the level of abstraction of the dynamical system description.

This is an idea of theoretical biologist Stuart Keuffman, and I came across it in a joint paper of him with Lee Smolin on cosmology (!). Here is the key quote:

(There is an analogous issue in theoretical biology. The problem is that it does not appear that a pre-specifiable set of "functionalities" exists in biology, where pre-specifiable means a compact description of an effective procedure to characterize ahead of time, each member of the set[8,7]. This problem seems to limit the possibilities of a formal framework for biology in which there is a pre-specified space of states which describe the functionalities of elements of a biological system. Similarly, one may question whether it is in principle possible in economic theory to give in advance an a priori list of all the possible kinds of jobs, or goods or services[8].)


Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon Jun 20th, 2011 at 05:44:13 AM EST
[ Parent ]
See also A Manifesto for Modern Political Economics: Extracts from our new book by Yanis Varoufakis
The cause of this failure is the inherent error; the inevitable logical inconsistency of any system of ideas whose purpose is to describe capitalism in mathematical or engineering terms. This is not, however, an intellectual failure as such. It is a mere reflection of capitalism's essence, which only appears to us as logical inconsistency when we try to transplant into political economics an mindframe confined within some fixed `geometry'. Imagine a theorist that tries to explain complex evolving ecosystems by means of engineering models. What would result but incongruity and a mindset bent on misunderstanding the essence of the explanandum; a flight from that which craves explanation?

Political economists are that kind of theorist: nuts-and-bolts mechanics trying to defeat indeterminacy and to replace it with `closure'; tragi-comic figures struggling to impose a mechanical template upon evolving systems. No matter how skilled as engineers, and irrespectively of how adept we are at machining our tools precisely, our efforts are doomed. If anyone doubts that, it is worthwhile looking at what happened when economists accepted the challenge of incorporating evolutionary mechanisms into their study of capitalism's historical dynamics: The exciting logic of Darwinian evolution (according to which complex patterns arise spontaneously from very simple underlying mechanisms) was emptied of all content and thrown onto the pyre of the inherent error.[i] Like a latter-day Midas, everything that the mainstream economist touches turns into a glittering, barren `thing', bereft of life and explanatory potential.

This is the stuff of unintended consequences of efforts to transplant a `scientific' approach to political economics. The best intentioned political economists begin with a healthy appreciation of the fact that their models are nothing but provisional forays into structured thinking. David Ricardo, Karl Marx, Alfred Marshall and John von Neumann are excellent examples. However, they are inevitably led astray by the very ambition to model economic phenomena by means of `closed' accounts of all the variables within. As we explained in preceding chapters, this ambition ensures that, before long, the models take over and the provisional terms in which they do their work start regarding themselves as direct reflections of a concrete reality.



Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon Jun 20th, 2011 at 07:11:02 AM EST
[ Parent ]
Kauffman, not Keuffman.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Mon Jun 20th, 2011 at 09:08:45 AM EST
[ Parent ]
there is no framework for a classical dynamical system modeling approach...where behaviors are terms in the equation.

There's Systems Theory which

von Bertalanffy believed a general theory of systems "should be an important regulative device in science," to guard against superficial analogies that "are useless in science and harmful in their practical consequences."

Sargon, somewhere in here, states Economics have abandoned Catastrophe Theory.  What was NOT said was CT was not found to be unapplicable to Economics it was found the mathematical techniques for applying CT to Economics were, and are, unknown; some nitty-gritty, in-the-trenches, actual for-fucking-real research needed to be done.  It was deemed (covertly, nobody came right out and said it) much easier to ignore what CT was telling them and bullshit their way through.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Wed Jun 22nd, 2011 at 09:12:28 PM EST
[ Parent ]

Display:

Top Diaries

Does anyone care?

by Frank Schnittger - Oct 10
68 comments

Spain is not a democracy

by IdiotSavant - Oct 14
3 comments

The Blame Game

by Frank Schnittger - Oct 8
67 comments

EU-UK Relations: Trading Blows

by Oui - Oct 8
22 comments

John Major's Encore

by ARGeezer - Sep 27
29 comments

Occasional Series